BOEMRE issues first deepwater drilling permit since moratorium

The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) today announced what BOEMRE Director Michael R. Bromwichj called a "significant milestone." It approved the first deepwater drilling permit since the Deepwater Horizon explosion and resulting oil spill. It approved Noble Energy's application for a permit to drill a bypass for Well #2 in Mississippi Canyon Block 519, approximately 70 miles south east of Venice, La.

"This permit represents a significant milestone for us and for the offshore oil and gas industry, and is an important step towards safely developing deepwater energy supplies offshore," said Director Bromwich. "This permit was issued for one simple reason: the operator successfully demonstrated that it can drill its deepwater well safely and that it is capable of containing a subsea blowout if it were to occur. We expect further deepwater permits to be approved in coming weeks and months based on the same process that led to the approval of this permit."

Initial drilling on this well began April 16, 2010, in 6,500 feet water depth, and the activities were suspended June 12, 2010, under the temporary drilling moratorium, issued in the wake of the Deepwater Horizon spill.

BOEMRE says that it has "worked diligently to help industry adapt and conform to new and rigorous safety practices."

Noble Energy has met new safety regulations and information requirements in Notices to Lessees (NTL) N06 and N10, and the Interim Final Safety Rule. These standards ensure that oil and gas development continues, while meeting unprecedented new safety regulations that are part of the Obama Administration's efforts to ensure that offshore drilling and production in the United States continues as safely as possible.

As part of its approval process, the bureau reviewed Noble Energy's containment capability available for the specific well proposed in the permit application.

Noble Energy contracted with the Helix Well Containment Group (Helix) to use its capping stack to stop the flow of oil should a well control event occur. The capabilities of the capping stack meet the requirements that are specific to the characteristics of the proposed well.

Owen Kratz, chief executive office of Helix Energy Services made the following statement

"We are very pleased to learn that Noble has secured a permit to drill in the Gulf of Mexico. The member companies of the Helix Well Containment Group have clearly demonstrated to the Department of Interior that a proven means of addressing spill containment is available in the Gulf. Helix's spill containment capabilities will continue to expand over the course of the coming weeks, so we look forward to working further with the BOEMRE to help additional drilling projects move forward."

The approved permit allows the drilling of a bypass well. An operator drills a bypass in order to drill around a mechanical problem in the original hole to the original geologic target from the existing wellbore. In this case, Noble Energy will be drilling around the plugs set in the original well when drilling was suspended in order to complete the project.

API and NOIA comment API's President and CEO Jack Gerard today, noting the BOEMRE approval was of one permit for one company to resume drilling in the Gulf of Mexico, said:

"While every permit is welcome news, tightening the screws on domestic oil and natural gas production during a time of increased demand and global uncertainty is a formula for disaster. This slow moving process continues to stifle domestic production and puts thousands of jobs at risk in the Gulf and around the country."

According to API, the lack of permitting is damaging to the Gulf Coast, the nation's economy, and energy security. A recent study by the consultant firm Wood Mackenzie shows that if the permit process is not speeded up, as much as 680,000 barrels of oil equivalent Gulf production a day could be at risk in 2019, and associated job losses could reach 125,000 per year by 2015.

NOIA President Randall Luthi today issued the following statement on the issuance of the first permit for new deepwater drilling in nearly a year.

"The actual issuance of a permit for new deepwater drilling is long awaited and an important step forward in the wise development of energy off our shores. With all the world-complicating factors, including rising oil prices, political turmoil in the Middle East and the loss of jobs in the Gulf of Mexico, this decision offers hope that the United States is getting back in the energy and jobs market.

"Taking the Department of Interior at its word that this is not a token permit and that many are lined up to be approved in the near future, today's action sends a calming signal to operators, producers and service companies that the long drought is just about over. It is also a compliment to Director Bromwich and a testament to the efforts of many within industry, that the containment and safety issues can be resolved when industry and BOEMRE work together.

"I have been critical of late of the Department of the Interior concerning the pace of permitting and their decision not to open any new areas for exploration in the future, but today I commend the efforts of all those who have worked long and hard to make this permit possible. Our member companies and the thousands of their employees look forward to getting back to work providing energy for American families."